diff --git a/web/client/src/library/components/search/SearchList.tsx b/web/client/src/library/components/search/SearchList.tsx
index fae23f2303..865270297f 100644
--- a/web/client/src/library/components/search/SearchList.tsx
+++ b/web/client/src/library/components/search/SearchList.tsx
@@ -281,6 +281,31 @@ export default function SearchList<
   )
 }
 
+function HighlightedText({
+  source,
+  search,
+}: {
+  source: string
+  search: string
+}): JSX.Element {
+  return (
+    <>
+      {highlightMatch(source, search).map(({ text, isMatch }, idx) =>
+        isMatch ? (
+          <b
+            key={idx}
+            className="inline-block text-brand-500 bg-brand-10"
+          >
+            {text}
+          </b>
+        ) : (
+          <Fragment key={idx}>{text}</Fragment>
+        ),
+      )}
+    </>
+  )
+}
+
 function SearchResult<T extends Record<string, any> = Record<string, any>>({
   item,
   index,
@@ -322,21 +347,23 @@ function SearchResult<T extends Record<string, any> = Record<string, any>>({
               <TBKModelName text={item[displayBy]}></TBKModelName>
             )}
           </span>
-          <small
-            className="block text-neutral-600 italic overflow-hidden whitespace-nowrap overflow-ellipsis"
-            dangerouslySetInnerHTML={{
-              __html: highlightMatch(index, search),
-            }}
-          ></small>
+          <small className="block text-neutral-600 italic overflow-hidden whitespace-nowrap overflow-ellipsis">
+            <HighlightedText
+              source={index}
+              search={search}
+            />
+          </small>
         </>
       ) : (
         <span
           title={item[displayBy]}
           className="font-bold"
-          dangerouslySetInnerHTML={{
-            __html: highlightMatch(item[displayBy], search),
-          }}
-        ></span>
+        >
+          <HighlightedText
+            source={item[displayBy]}
+            search={search}
+          />
+        </span>
       )}
       {isNotNil(descriptionBy) && (
         <small className="block text-neutral-600 italic overflow-hidden whitespace-nowrap overflow-ellipsis">
diff --git a/web/client/src/library/components/search/help.ts b/web/client/src/library/components/search/help.ts
index 5292676475..157377b3a2 100644
--- a/web/client/src/library/components/search/help.ts
+++ b/web/client/src/library/components/search/help.ts
@@ -3,11 +3,26 @@ export { filterListBy, highlightMatch }
 export const EMPTY_STRING = ''
 const MATCHED_LENGTH_TO_DISPLAY = 40
 
-function highlightMatch(source: string, match: string): string {
-  return source.replaceAll(
-    match,
-    `<b class="inline-block text-brand-500 bg-brand-10">${match}</b>`,
-  )
+export interface HighlightPart {
+  text: string
+  isMatch: boolean
+}
+
+// NOTE: Returns plain text parts so callers can render them as React text nodes
+function highlightMatch(source: string, match: string): HighlightPart[] {
+  if (match === EMPTY_STRING) return [{ text: source, isMatch: false }]
+
+  return source
+    .split(match)
+    .flatMap((text, idx) =>
+      idx === 0
+        ? [{ text, isMatch: false }]
+        : [
+            { text: match, isMatch: true },
+            { text, isMatch: false },
+          ],
+    )
+    .filter(part => part.text !== EMPTY_STRING)
 }
 
 // NOTE: This function is used to filter the list of models in the search bar
diff --git a/web/client/src/library/components/search/tests/SearchList.spec.tsx b/web/client/src/library/components/search/tests/SearchList.spec.tsx
new file mode 100644
index 0000000000..9eda3db102
--- /dev/null
+++ b/web/client/src/library/components/search/tests/SearchList.spec.tsx
@@ -0,0 +1,66 @@
+import { describe, it, expect, vi } from 'vitest'
+import { MemoryRouter } from 'react-router'
+import { render, fireEvent } from '../../../../tests/utils'
+import SearchList from '../SearchList'
+
+// jsdom has no ResizeObserver, which TBKResizeObserver needs to mount
+vi.stubGlobal(
+  'ResizeObserver',
+  class {
+    observe(): void {}
+    unobserve(): void {}
+    disconnect(): void {}
+  },
+)
+
+const PAYLOAD = '<img src=x onerror="alert(1)">'
+
+function renderSearch(
+  name: string,
+  search: string,
+  showIndex: boolean,
+): HTMLElement {
+  const { container } = render(
+    <MemoryRouter>
+      <SearchList<{ name: string }>
+        list={[{ name }]}
+        searchBy="name"
+        displayBy="name"
+        showIndex={showIndex}
+      />
+    </MemoryRouter>,
+  )
+
+  fireEvent.input(container.querySelector('input')!, {
+    target: { value: search },
+  })
+
+  return container.querySelector('[role="menuitem"]')!
+}
+
+describe.each([true, false])('SearchList with showIndex=%s', showIndex => {
+  it('should render markup in project text as text', () => {
+    const name = `${PAYLOAD}model`
+    const result = renderSearch(name, 'model', showIndex)
+
+    expect(result.querySelector('img')).toBeNull()
+    expect(result.textContent).toContain(name)
+    expect(result.querySelector('b')?.textContent).toBe('model')
+  })
+
+  it('should render markup in the search string as text', () => {
+    const result = renderSearch(`a${PAYLOAD}b`, PAYLOAD, showIndex)
+
+    expect(result.querySelector('img')).toBeNull()
+    expect(result.querySelector('b')?.textContent).toBe(PAYLOAD)
+  })
+
+  it('should highlight every match, including adjacent and trailing ones', () => {
+    const result = renderSearch('ababxab', 'ab', showIndex)
+
+    expect(
+      Array.from(result.querySelectorAll('b'), b => b.textContent),
+    ).toEqual(['ab', 'ab', 'ab'])
+    expect(result.textContent).toContain('ababxab')
+  })
+})